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The Us Treasury Market In August 1998: Untangling The Effects Og Hong Kong And Russia With High Frequency Data

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Author Info

  • Mardi Dungey

    ()

  • Charles Goodhart
  • Demosthenes Tambakis

Abstract

The second half of AUgust 1998 was dominated by two events. From 14 to 28 August the Hong Kong Monetary Authority (HKMA) intervened in the Hong Kong equity markets to prevent a speculative double play against their currency board. On 17 August Russia announced its default on sovereign bonds. This paper demonstrates that the HKMA interventions had a substantial impact on the outcomes for US Treasury markets during this period. Using a careful analysis of high frequency bond market data both events are shown to intersect in the US Treasury market, despite having originated from seemingly unrelated shocks. On this evidence the shocks emanating from Hong Kong were important for the US Treasury market. The lesson for policy makers is that major markets play an important role in transmitting and absorbing the effects of unrelated shocks.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2005-25.

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Length: 34 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:een:camaaa:2005-25

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References

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  1. Hwang, Soosung & Salmon, Mark, 2004. "Market Stress and Herding," CEPR Discussion Papers 4340, C.E.P.R. Discussion Papers.
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Cited by:
  1. Mardi Dungey & M.Tugrul Vehbi, 2011. "A SVECM Model of the UK Economy and The Term Premium," CAMA Working Papers 2011-26, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Mardi Dungey & Michael McKenzie & Vanessa Smith, 2007. "Empirical Evidence On Jumps In The Term Structure Of The Us Treasury Market," CAMA Working Papers 2007-25, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Mardi Dungey & Renée Fry & Vance L. Martin, 2006. "Correlation, Contagion, and Asian Evidence," Asian Economic Papers, MIT Press, vol. 5(2), pages 32-72, June.
  4. Nippani, Srinivas & Smith, Stanley D., 2010. "The increasing default risk of US Treasury securities due to the financial crisis," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2472-2480, October.

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